10 ideas to solve housing crisis from Business Council of Australia

Australia's housing crisis is an issue of national importance says the Business Council of Australia, and it has 10 ideas to solve it.

Residz Team 7 min read

From a summit on build-to-rent housing to the phasing out of stamp duty, there’s a lot of meaty stuff in the Business Council of Australia’s (BCA) new report on housing.

“Addressing the Nation’s Housing Challenge” seeks to address the challenges and failures in Australia’s housing crisis. The council says the housing market both affects and involves businesses.

“Without reasonably priced and suitable housing, the nation risks driving away the best talent, limiting our economic growth and ultimately putting the nation’s future prosperity at risk.

“This is an issue of national importance.”

The core theme of the report is to increase supply of housing, by reducing red tape, planning ahead, and backing innovative solutions.  It has released 10 recommendations, which we’ll set out briefly below.  

Snapshot of Australia’s housing problems

Australia’s a great place to live, with most cities boasting the ideal climate for city living at some time of the year.

But it comes at a huge cost. Research commissioned by the business council shows that the cost of housing mortgages and rents is the largest financial worry for Australians, above groceries, electricity prices, health costs, or petrol.

When measured by median house price compared with median income, Sydney ranks as the second most expensive city globally. Melbourne is the 9th, Adelaide the 14th, and Brisbane the 17th.

In a nutshell, there are not enough new homes being built compared with demand, says the Business Council of Australia.  It says the forward pipeline of projects is significantly down, and has been for a number of years.

The business council says new housing supply has been falling since 2016-17, particularly new apartments and other medium density dwellings.


Poor planning and restrictive zoning aren’t helping, and demand has lifted thanks to an increased number of smaller households since the pandemic.

However, stopping or dramatically reducing new migrants to the country isn’t the answer to our housing crisis.

“As the forecasts in the 2023-24 Budget make clear, by the end of the 2023-24 financial year there will be 215,000 fewer migrants in Australia compared to what would have been expected and planned for pre-pandemic,” says the report.

10 recommendations to improve housing supply

So, how to solve the housing crisis? The Business Council of Australia has 10 recommendations.

Set targets

The federal government should set national net-additional dwelling targets over 10 years that are tied to forecast population growth.

These should then be cascaded down for the action of states and territories, and linked to financial incentives for meeting or exceeding the targets and penalties for failing.

This should take into consideration both greenfield (new subdivisions and land release) and infill development.

Make planning systems faster and more efficient

Governments must take action to fix poorly performing planning systems, says the BCA report.

Over the next several months, the council will undertake a comparison of regulations across the

country. This will include the planning systems of each state and territory, ranking them on efficiency and complexity.

Governments should consider upzoning areas with existing infrastructure and services to facilitate housing supply.

Modular homes

A National Cabinet taskforce should explore ways for faster housing supply to be built, recommends the BCA.

Innovations such as prefabricated and modular homes, where off site manufacturing is used to build components, can allow for high quality homes to be constructed faster than a bespoke development.

At the moment planning regulations and codes can present challenges for approval for dwellings made using these types of construction techniques. The taskforce should strip back excessive regulations to fast-track delivery of these dwellings.

Infrastructure money should be linked to housing

Schools, transport, medical facilities and open space - these are the types of infrastructure that support the supply of new housing.

The Business Council of Australia report says that Infrastructure Victoria research shows building new infrastructure from scratch (for greenfield development) is up to four times more expensive than adapting infrastructure in existing suburbs to cater for growth.

The BCA sees an opportunity to tie a portion of infrastructure grants specifically to projects that have clearly defined and measurable housing supply outcomes.

“This would ensure that funding being provided to states, territories and councils for infrastructure delivery was guaranteed to support the structures necessary to see new housing delivered.”

As McGrath Chief Auctioneer Scott Kennedy Green says in our article “Growing trend: Home buyers choosing bush over beach”, great infrastructure naturally increases demand for homes.

“When you’re given wonderful regional hubs with excellent infrastructure and quality schooling and retail, and the whole gambit of metro life in the bush, you’ll find people gravitating towards those.”

Use the federal review into projects to tilt towards housing

The Business Council of Australia sees the current review into infrastructure projects as an ideal opportunity to reprioritise those that support new housing.

“The federal government is currently reviewing its 10-year $120 billion pipeline of projects. As part of this process, funds should be reprioritised into projects that explicitly support the delivery of new housing supply.

“For example, funding for new roads or other infrastructure that service new housing land release areas.”

“Once in a generation” chance to link housing and transport services

New transport developments across Australia’s major cities represent a “once in a generation” investment opportunity to underpin housing and jobs growth.

The BCA says the opportunity to maximise the benefits of major projects (such as those listed below) shouldn’t be squandered.

The council recommends a strengthened focus on transit-oriented development in our major cities, taking advantage of the massive investment that has taken place over the last decade.

Phasing out stamp duty

According to the BCA report, stamp duty is a disincentive for owners that want to move.

‘This means that people in changed circumstances, for example empty nesters with

large homes, are disincentivised by the tax system from downsizing and making a family sized property available for another larger household.”

The council recommends the replacement of stamp duty with an annual land tax “to address this issue fairly and remove this issue of moving to the ‘right sized’ property.”

It says this could start by strengthening schemes specifically targeted at older demographics to enable downsizing.

“The federal government must support this transition by ensuring that GST relativities are not negatively impacted by these reforms, and potentially incentivising this transition.”

Reform developer costs

The BCA wants governments to consider the impact of charges like development levies on new housing supply.

While they aim to support infrastructure, it claims they also increase dwelling costs, reducing the overall supply of homes.

Developer contributions, accounting for about 10% of greenfield development costs on average, are more significant than other taxes like stamp duty, says the BCA. These contributions vary greatly and can create unexpected expenses, it says.

A summit on “build to rent” housing

“If we are serious about addressing housing supply shortages, the government needs to harness investment in new housing supply including in the build to rent sector, rather than discouraging it.”

Build to rent developments are relatively new to Australia but the council says they’ve had long term success in the U.S. and U.K.  

Put simply, they are new housing developments that are made available for long term rental, and often attract institutional capital investment.

The BCA wants to see a summit around how best to facilitate more build-to-rent housing.

“The government should work with industry and experts to remove impediments and grow opportunities to broaden the build-to-rent housing market, looking at taxation treatment, foreign investment restrictions, planning impediments and incentives, and funding and financing options.”

Balancing NIMBY concerns with needs of the nation

Finally, the council sees a need for addressing issues where existing residents push back against infill development in their suburb.

They’re often referred to as NIMBYs (Not In My Back Yard).

“Opposition to new housing can be a legitimate response to infrastructure deficiencies (as

previously discussed), but it can also be driven by resistance to change by existing residents, particularly in established areas.”

It recommends that state and federal governments must take a stronger role to make sure local concerns are balanced by the social and economic needs of the state and the nation in respect to housing supply.

Summary

The current housing market is failing to produce sufficient supply to meet demand. New

dwelling approvals are now at a decade low.

According to the “Addressing the Nation’s Housing Challenge” report it’s up to governments to work with industry to deliver sufficient housing supply.

“All levels of government must have a strong focus on the supply of new homes.

“This is broader than social housing, which is a key component of a much bigger picture.”

The BCA concludes that housing supply policy must be targeted across the spectrum to ensure there is sufficient housing across all income levels.

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